Several Chinese companies that last year pledged to invest in North Korea’s construction sector are trying to back out of their contracts because there are no signs that international sanctions on the isolated country will end soon, sources in the two countries told RFA.
The UN and U.S. sanctions are aimed at depriving Pyongyang of cash and resources that could be funneled into its nuclear and missile programs.
The investors speculated that the sanctions would be lifted or eased last year, even as U.S. President Donald Trump and North Korean leader Kim Jong Un walked away from their summit in Hanoi with no denuclearization for sanctions relief deal in place.
Pyongyang and Washington now appear to be even farther apart than they were then, and it seems like sanctions will continue indefinitely.
Given the circumstances, Chinese companies are willing to pay penalties to breach their contracts in order to pull out.
“These days, everyone in Pyongyang is anxious over coronavirus, but against that backdrop, some Chinese companies that made down payments to invest in North Korea last year are pushing authorities into a corner by demanding a way out,” a high-ranking official in Pyongyang told RFA’s Korean Service Tuesday.
The source said that the Chinese businessmen were in Pyongyang as part of an event organized by the Association of Businesses Investing in North Korea to pay tribute to the statues of Kim Il Sung and Kim Jong Il.
“After the event, many of the businessmen said they wanted to withdraw their investment, and that created quite a stir,” said the source.
“North Korean officials fiercely protested, but the businessmen were not having it,” the source said.
The source said that the Chinese companies were to supply materials that are currently outlawed by sanctions, such as structural steel and ironware.
“They decided to bet on sanctions being lifted or eased, but now they want to nullify their investment,” said the source.
The source said that the companies made down payments last year when they signed their investment contracts.
“But now they want to withdraw, even if it means giving up their deposits,” said the source.
Another high-ranking trade official in Pyongyang said Wednesday that up until the middle of last year, Chinese investors were falling over each other to get a piece of North Korea.
“They expected that sanctions on North Korea would be quickly resolved, but now that it appears the relationship between North Korea and the U.S. is becoming increasingly negative, they decided that they want to wring their hands of any Sino-North Korean ventures they had once hoped to be part of,” the second source said.
“Most of the investors are businessmen who believed sanctions would be eased. That is why they set up the Association of Businesses Investing in North Korea, to facilitate their investment,” said the second source.
The source said that North Korean authorities are desperate to keep the investors from pulling out.
“They say they want out, even if they have to give up their down payments, but in response, even Kim Jae Ryong, the premier of North Korea almost begged them to reconsider their decision to withdraw,” the second source said.
“Some of the investors are demanding that the investment contract be nullified and the down payment be returned,” said the second source.
“They feel that since they invested on the condition that U.S. sanctions would be eased, it is reasonable to demand to get their money back. The authorities are in a real bind.”
Reported by Jieun Kim for RFA’s Korean Service. Translated by Leejin Jun. Written in English by Eugene Whong.Print
Originally published by Radio Free Asia.